Institute of Business Management

December 2018

Authors: Zarlush Ali, Sania Saeed, Sameera Nadeem, Wajiha Wasif & Daniyal Hassan

A game of strategy: Gul Ahmed in the textile industry

of Pakistan
Abstract: The Gul Ahmed Group began trading in textiles in the early 20th century. Gul
Ahmed Textile Mills Limited is a publicly-held enterprise providing a wide range of
textile products in Pakistan as well as having a very large export base. It was listed on the
Karachi Stock Exchange in 1972. Since then, the company has made rapid progress and
is currently one of the leading composite textile houses in the world. More than 50 years
since its inception, the name Gul Ahmed is still globally synonymous with quality,
innovation & reliability. The case presented analyzes the textile industry dynamics and
how external forces such as political instability, economic fluctuations, technological
changes and altering social preferences have impacted the industry structure. It also
discusses the competitiveness of Gul Ahmed, analyzing its various dimensions such as
logistics, operations and marketing & an overview of its major competitors. In order to
tap into the changing dynamics of consumer behavior, Gul Ahmed can opt for
introduction of varieties appealing to younger demographics while continuing to deliver
on its promise of quality. This case deals with the complexities of the textile business in
Pakistan and provides an opportunity to apply strategic management concepts to the
industry & organization chosen.

Key Words: Industry Analysis, Textile, PEST Analysis, Macro-economic effects,

Generic Strategy, Value Chain, EFE, IFE, CPM, Value chain, Core competencies,
strategy, QSPM, Implementation.

The textile sector of Pakistan plays an essential part in the country’s economy
because of its significance associated largely to large cotton production capacity. The country
currently ranks as the 4th largest producer of cotton in the world and has accordingly exploited
on this ability by developing and promoting its textile sector. As a result, Pakistan now also has
the third largest spinning capacity in all of Asia. At the time of independence in 1947 there were
only 3,000 looms installed in the mills sector. Now the installed looms are around 16,000 in the
mills sector and 300,000 in power looms sector. The cloth processing facilities have also been
increased with the increase in production of cloth. Textile industry is the dominant
manufacturing sector in Pakistan. It is based on locally available raw cotton, employs 40% of
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total industrial labor force and contributes 27% of industrial value addition with 60% share in
total export of the country. The industry consists of large-scale organized sector and a highly
fragmented cottage / small-scale sector. The various sectors that are a part of the textile value
chain are: Spinning, most of the spinning industry operates in an organized manner with in-house
weaving, dyeing and finishing facilities. Weaving comprises of small and medium sized entities.
The processing sector, comprising dyeing, printing and finishing sub-sectors, only a part of this
sector is operating in an organized state, able to process large quantities while the rest of the
units operate as small and medium sized units. The printing segment dominates the overall
processing industry followed by textile dyeing and fabric bleaching. The garments
manufacturing segment generates the highest employment within the textile value chain. Over
75% of the units comprise small sized units. The knitwear industry mostly consists of factories
operating as integrated units.

Pakistan is the world’s 4th largest producer and 3rd largest consumer of cotton. The Textile and
Clothing Industry has been the main driver of the economy for the last 50 years in terms of
foreign currency earnings and jobs creation. The Textile and Clothing Industry will continue to
be an important engine for future growth of the economy; there is no alternative industry or
service sector that has the potential to benefit the economy with foreign currency earnings and
new job creation, especially if synergy is developed amongst different sub sectors and efforts are
made to aggressively grow the Readymade Clothing Sector. Pakistan’s Textile Industry had
proved its strength in global market during the last four decades. It has proved its strength even
in post quota era by not only sustaining its position but, also showing growth during 2005 to
2007, but declined to $11.1 billion in 2008 due to financial and economic meltdown globally.
The Garment Sector & especially the Knit Garment Sector need special focus in future policies

The history of Gul Ahmed is not different from the origins of other textile companies in
Pakistan in the early 1990s. The company further progressed then and converted in to a large
remarkable name under Gul Ahmed since 1953. The company enjoys a leading position and
progressive growth since then in the world of textile. The company got registered in Karachi
stock Exchange in 1970. The company operates in the world of textile with an installed capacity
of more than 130,000 spindles, 300 state-of-the-art weaving machines and most modern yarn
dyeing, processing & stitching units. Gul Ahmed has a complete manufacturing chain starting
from cotton yarn to finish products. The company has their own backup and engine providing
machinery. The company also caters and fulfills its responsibility towards the environment by
diluting and purifying water, the company has set up a 100% water purifying plant.

The company excels in the textile world and also efficiently growing in the world of retail
outlets. Gul Ahmed has its retail stores working and producing variety of stores according and
varying for different culture and seasons in Karachi and in other cities of Pakistan. Not only in
Pakistan but due to its quality reliability and innovation Gul Ahmed is known for its processes all
across the globe.
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Ideas by Gul Ahmed and other official retail outlets are emerging as one of the most convenient
and sophisticated solution which is a best fit for the culture and working class. The group aims to
be at a higher scale in terms of providing a better value and more trendy accessories and
clothing. As they have their own chain of outlets and processing mills quality of the cloth and
outlet is always maintained.

Vision

“Setting trends globally in the textile industry. Delivering the best products and services to our
customers”

Mission and Values

“To deliver value to our stakeholders through innovative technology, teamwork and by fulfilling
our social and environmental responsibilities”

The dynamic textile industry of Pakistan

The textile industry is largely reliant on its suppliers in terms of ensured supplies as and when
requires, however, the bargaining power of buyers continues to remain questionable because of
the standardization of inputs and availability of outsized number of suppliers in the market. On
the supplier front, textile industry is linked to raw cotton production, chemicals and dyes, oil and
lubricants and machinery including looms and spindles. The industry can switch suppliers
quickly and these suppliers will find it difficult to enter into the industry, along with this the
business is very important for the suppliers and more important in a country like Pakistan.

Textile industry accounts for 38% of the total labor force in Pakistan out of which a significant
10% is involved on the agricultural end in production of cotton. Pakistan production of cotton
was reported at a record high of 15 million bales of 470 lbs. in 2014-15 with a large proportion
of conventional cotton being produced as opposed to BT crops, which has reported a low
demand in the international market due to its low flexibility and ability to produce by products
and derivatives. Genetically modified cotton fetch a closing price of Rs 1800 -2200 per 40 kg
which has decreased over the years due to highly elastic supply curve as a result of dumping of
bumper crop each year. Production of cotton is shown in figure.

Year Pakistan
2011 10600
2012 9300
2013 9500
2014 10600
2015 7000
2016 7700
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2017 9150 15000

10000
5000 Pakistan
0

Dyes used in textiles are used to color the original raw material and therefore product. Dyes can
be synthetic, which means they are scientifically made with chemicals, or natural. Dyeing is
usually processed into textiles through a combination of water and the synthetic or natural dyes.
Textile sector considered as backbone of Pakistan’s economy and the consumption of textile
dyes and chemicals are abundant for dyeing, printing, bleaching etc. The Pakistan Chemicals &
Dyes Merchants Association (PDCMA) is an umbrella for over than 1200 member firms through
all over Pakistan that supply chemicals and dyes to different industries in the region including
textile.

The industry has substantially been able to reduce its dependence on electricity supply from
WAPDA and other government owned grids to power its engines because of its ability to
produce its own electricity through company owned plants. Companies have been successful in
providing additional units of electricity to nearby areas because of its ability to produce above
350 megawatt of electricity.

The buyers of GulAhmed can be categorized into 3 distinctive categories:

1. The mass national and International customers – 20%

2. The yarn, thread, gray cloth purchasers – not more than 10%

3. Export to international retail stores – 70%

Exports to International retail outlets generate Gul Ahmed’s 70% revenue. Their biggest buyers
in the international market are IKEA, Asda Stores Ltd, ZARA, and Target. These retail stores are
renowned throughout the globe and Gul Ahmed takes great pride in being their valued suppliers.
However the international market is toughening and Gul Ahmed is fully aware of the challenges
that lie ahead. Major competitors in the international market are other developing countries like
India and Bangladesh. Even China is competing strongly in major export markets i.e. US and
EU.

The average common buyer of the finished goods comprise of only 20% of Gul Ahmed’s total
revenue. Most of these 20% buyers are local buyers purchasing majorly from Gul Ahmed’s
flagship stores present in all the major cities. These buyers are not highly sensitive to price and
are mostly brand loyal customers. Major proportion of Gul Ahmed’s buyers is adult female. Gul
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Ahmed is also working hard in tapping the young female market segment by introducing more
‘girlish’ designs. They have also launched their ‘SALT’ collection this year, introducing more
westernized clothing items for young working females.

Gul Ahmed is also able to generate good 10% revenue by supplying excess yarn, thread and gray
cloth to other manufacturers in the market. Gray cloth is an industry term used for plain

Unprinted cloth. A lot of manufacturers in the industry have dying and printing equipment but do
not have the machinery or skill to actually produce their own quality cloth. Gul Ahmed is
cashing this market well by earning good sales out of this. These buyers are not fixed and are
mostly small scale manufacturers. However as they cannot take this function in-house their
bargaining power remains low.

The threat of new entrants in the textile industry of Pakistan is moderate because there are a
number of large firms who have the cost and performance advantage in the segment. The most
common textile firms are a house of Itihad, lucky textile mills, orient textile, So Kamal, Din
Lifestyle and others. Also, the established brand identities such as AlKaram, Gul Ahmed and
Khaddi have established their position in the industry. Additionally, there are no proprietary
differences in the industry because all the firms are playing on the similar products. The major
products which are used include categories like raw cotton, artificial silk, filament yarn, and
wool.
Moreover, the large companies existing in the industry are able to obtain huge cost advantage
due to their experience which would be difficult for new entrants to obtain. Experience not only
allows your brand to be well established and hence be the favorite of the customers but it also
allows you to have some performance advantages. You get the experience and then you become
one large firm there may be a possibility that not only you will achieve economies of scale but
you will even tend to get higher sales due to more experience.

Now if we talk about the capital needs and government restriction to enter the textile industry
then, capital requirements for this industry are not very intensive as any particular licenses or
qualifications are required to step into the industry. It is not easy to convince customers to
change the companies they already deal with. So new entrants will face very heavy resistance
from the already well established brands who not only have very high brand equity, but also with
their experience they can lower down their prices without considerable damage to their brands to
force the new entrant out of business.

Though, entrance in terms of capital investment is easier, however, when it comes to the getting
accessing to distribution channels and skilled labors then, new companies are expected to face
certain challenges because all the distribution channels are properly acquired by the established
brand identities which use their strong influence to cut down the additional cost.

Additionally, the companies like Gul Ahmed have tried to lower their cost significantly by
establishing their own electricity plant which helps the company in reducing its dependency on
the government bodies such as WAPDA.
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Threat of substitutes in this industry is particularly low because there is no real substitute of
this product it’s a basic necessity that can only be satisfied by the product, for example if USA
withdraws 45%-50% textile export from Pakistan does not mean they have given up on textile
rather they have shifted it to other Asian countries like Bangladesh, India and china since
customer has no particular substitute the threat remains low.

There is a low threat of substitutes in this industry, since there is very negligible chance that the
potential customers will substitute the firm’s products mainly because of the low quality and
standard designs of the product. At the same time the substitutes that are available, they do not
meet the performance of the firm’s products and therefore are not able to compete even with the
lowered prices. The customer is least likely to substitute considering the amount of customer
involvement in the established brands and their loyalty to it. Switching to unbranded clothing
line will cost customers less hence as a result there are switching costs associated to it.

The bargaining power of buyers is low and continues to remain questionable because of the
standardization of inputs and availability of outsized number of suppliers in the market. As there
are large number of suppliers so buyers don’t have shortage and can switch to other brands
easily. The bargaining power of suppliers is also low as firms can switch suppliers quickly and
easily. Moreover, many firms producing cotton and cloth are present in the industry, so each
supplier needs to make an effort to stay competitive in the market.

In this rapidly growing industry there are significant differences in the final product styles as
well as brand identities between competitors creating a lot of rivalry between firms. The market
share of major competitors is nearly the same as that of Gul Ahmed and most of these
competitors have invested in a diverse range of product lines. These lines more or less, require
some information to be delivered to their buyers in order to understand them better. From the
customers’ side, due to unique brand images it will be comparatively more difficult to switch
between competing firms (especially in terms of cost). Speaking of cost, most of it is derived
from the purchase of heavy duty machinery such as looms and so, constitute a large part of the
fixed cost this season-based, commitment-prone industry. Cost of production isn’t as high due to
Gul Ahmed’s own electricity producing plants.

Also it is not easy to exit the industry since there are long-term commitments and specialized
skills are involved. At the same time it will not be easy to forget such a big brand as Gul Ahmed.
The brand is well established and has no room for leaving the industry.

There is varying cost differences that the customers would incur in switching to competitors,
depending on which rival it is going for. Moreover, all the major competitors are almost the same
size and as equally competitive.
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Some macro-economic factors affecting the textile industry

Export Investment Support Fund: The Pakistani government has pledged to set up the Export
Investment Support Fund to boost the country’s textile export earnings as part of the federal
budget for 2009-10. The government plans to give an enhanced duty drawback to value-added
textile exporters instead of providing support for research and development. Additionally, there
is also a summary to withdraw the 12.5 per cent cross subsidy on gas, to mainly benefit the
spinning sector.

SRO 231 on Sales tax: The textile industry is one of those industries in Pakistan that enjoys 0%
rating facility, which means that their products are not subject to any sales tax. This exemption
was given by the government through SRO 509 in 2007. The new SRO 231 (2011) was issued to
make changes to the previous one through application of new sales tax regime for textile sector.
This new SRO imposed a tax of 4% on finished fabrics sold to nonregistered buyers which was
to be charged at all stages following the spinning stage. The zero-rating facility was to be offered
to registered local buyers and a 6% sales tax was to be applicable at the yarn stage. However, a
100% zero-rating facility was retained for exporters

Withdrawal of Export Financing: The State Bank of Pakistan has withdrawn export financing
from all types of yarn. Additionally, banking institutions are charging a high rate of mark-up
from the textile industry. Whereas in the past, nominal rates were charged to encourage new
investment opportunities, in recent years, a change in the monetary policy and KIBOR rates has
been observed.

Import Duties: Duties are levied on all imported items, however, exemptions are available under
various SROs which require undertakings that a certain percentage of the yield will directly and
regularly be exported in the next 5 years; this may hinder the acquisition of required raw
materials by the local industry.

Credit to Private Sector: Domestic credit to private sector (% of GDP) in Pakistan was reported
at 15.38 % in 2015, according to the World Bank collection of development indicators. This has
caused ineffectiveness of monetary policy in textile sector market capitalization as firm’s raised
funds though floating shares on the stock exchange or approach unconventional banking
including reliance of capital markets.

The urban youth of Pakistan, comprising 32% of total population (15-29 year olds) is conscious
of the latest fashion trends. The Pakistani society is one driven by consumerism and staying up-
to-date with fads. Passionate designers create designs that represent the cultural heritage of the
country which can compete even in the international market. The income brackets of middle
class are increasing and so is their appetite for apparels, especially Lawn products which are a
perfect choice of cloth for the hot and humid prevalent weather of Pakistan. Working women
numbers are on the rise and have created a significant impact on the sales of the industry.
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Western wear and Pret wear are popular among them due to exciting and future-oriented
advertising campaigns.

Increasing status quo concept as well as changing customer preferences, demographics and
standard of living is adding to the favorable and relatively increase demand for the branded
clothing. Moreover Pakistan is among those countries of the world where a major lump of the
income is bound to spend on clothing and eating. This adds to positive demand increasing
however, increasing choices provided by different competitors within the textile industry
eventually divides the overall inclining demand, leaving a small portion for each firm.

Bar coding facilitates recording of detailed data by converting it to electronic form and can be
easily shared among members through EDI system. EDI with its high efficiency is able to
replace the traditional ways of transmission like telephone, mail and even fax. EDI enables
managers to analyze and apply it in their business decisions. It also helps in expediting order
cycle that reduces investment in inventory. EDI based network enables Company to maintain
quick response and closure relations with suppliers and customers, who are geographically
dispersed. Manufacturers and retailers can share even new designs developed through
CAD/CAM.

Introduction of high end manufacturing plants and updated printing and designing technology,
give firms products a new objective to compete and gain more market share, thus indulging other
competitors to change to more advanced technology in order to bring different styles and quality
in their products.

The textile sector plays a pivotal role in the exports of Pakistan, contributing 57% to the
country’s exports. Its contribution to the total GDP is 8.5%. The industry provides employment
to approximately 15 million people in the country making it the second largest employment
sector in Pakistan. According to Pakistan Textile Journal, Pakistan is among top 10 textile
exporters of the world. Textile export of world over is about $400 billion out of which China
tops the list with present export of $55 billion, followed by Hong Kong $38 billion, Korea $35
billion, Taiwan $16 billion and Indonesia, India, Bangladesh and Pakistan $11billion each.

Pakistan’s textile and clothing exports fell 1.30 per cent to $1.064 billion in January 2017 on a
year-on-year basis, the Pakistan Bureau of Statistics (PBS) reported. In the seven months to
January, the value of exported textile and clothing products fell 1.54pc year-on-year to $7.224bn.
One of the prime reasons cited for the textile package was the need for countering the rising cost
of production. The interminable power and gas cuts have stopped exporters from producing their
orders on time. Many have watched helplessly as their clients have instead turned to Vietnam or
Bangladesh. Only those manufacturers which invested heavily in their own energy production
survived.

The Chinese investment in the country's energy infrastructure is a supposed beam of light in the
dark tunnel. However many fear the power due to be produced by Chinese-built power plants is
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expected to be expensive. Pakistan's fourth nuclear power plant built with Chinese assistance as
part of Islamabad's plans to produce 8,800 MW from atomic energy by 2030.

Total exports, meanwhile, 60pc of which are made up by textiles, declined by 13pc in the first
nine months of this year compared to last, a sign that the industry's recovery is yet to begin.

EFE MATRIX:
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Analysis of EFE Matrix:

New style and Trends Demands

The growing customer demand of new styles and designs is an opportunity for Gul Ahmed As
they are equipped with modern technology of air jet looms and advance printing and Dyeing
machines so they can cope with it quite well.

New market segments around the world

The problem that Gul Ahmed is facing is that of limited exposure in the markets. They are
Catering only to US, Europe, Spain etc. But there are also other markets of Russia, China and
others which they are not covering which can give Gul Ahmed exceptional returns.

Abolition of Quota

The abolition of quota after 2005 gives the company advantage to increase their capacities and
cater as much exports as they can

Lower cost competitiveness

Gul Ahmed is a completely vertical unit. They are making their own yarn, and continuing the
value chain till final packing of the products, so the lower cost competitiveness gives them an
incentive to better compete in the market.

The analysis of the critical factors of the EFE matrix and their weighted score reveals that the
new market segments around the world is the most important aspect of the matrix as it has the
highest weight associated but the rating is very low which means Gul Ahmed is not successfully
catering it. On the threats strong international competitors is the biggest threat to Gul Ahmed at
this point in time since the textile business is quota free and any country can export to any other
depending on efficiency.

The total weightage score of 2.58 conveys that Gul Ahmed is performing slightly above average.
Textile industry being the backbone of Pakistan has great potential for a company like Gul
Ahmed to avail the resources and channelize them. The Growth in Bangladesh, China and
others countries textile share is a warning signal to Pakistan since Pakistan share is on decline
in such emerging market trends.
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Gul Ahmed isn’t the only player: A fierce competitor analysis

Khaadi

Khaadi is one of the leading brands in Pakistan currently and is one of the favorites among
women. It has a diversified portfolio of “hand-woven technique” products including women’s
Pret wear, unstitched lawn, men’s and children’s wear as well as items like jewelry, bags and
shoes. The company was founded by Shamoom Sultan in 1998 and the first shop was opened in
1999 and then grew to multi-stores in just two years. Khaadi Home stores are also quite popular
which offer an array of products including bedcovers and tableware. Khaadi has expanded
internationally since 2010 when it opened its first over-seas store in the UAE. Today it has stores
in UK and Malaysia, Canada and many other countries. The textile giant has also enjoyed
industry awards such as Lux Style Award in high street brand thrice.

Chenab Limited

ChenOne stores formed Pakistan’s first home textile brand while the company have the largest
share in exports of home textile products in the country. Chenab has the equipment to make
multiple products including ready-made garments. It possesses one of the largest processing
units in Pakistan ranging from dying to stitching.

It has in-house electricity production of nearly 12 MW which is sufficient to meet its domestic
needs. In 1974 this Pakistani conglomerate was founded by Mian Mohammad Latif as Chenab
Fabrics and Processing mills which later turned to Chenab Limited. It also manages several
international associated companies such as Chenab United States, ChenSoft and others.

AlKaram

Alkaram group is a manufacturer and supplier of distinguished fabric for apparel, home and
industrial markets with clients all over the world. It is one of the few vertically integrated
organizations in Pakistan. Offering a diversified range of products, customers can mix and match
from a wide variety of print, yarn dyed, solids, dobby and jacquard. The company also deals in
twill, sateen, basket weave and percale, knitted to woven fabric; and thread counts ranging from
130 to 1000.

Despite a declining trend in the national textile exports for the past three years, the exports of Al-
Karam Textile Mills have been persistently increasing, as the company surpasses its Indian and
Bengali competitors in producing high quality products. Al-Karam Textile exports increased 14
per cent in 2014-15, compared to the previous year. The company’s exports stood at $148.637
million in 2014-15, against 2013-14’s $130.563 million. While most of Pakistan’s textile units
do not have any testing protocol like international markets, Al-Karam is fulfilling all the
international testing protocol, including colour, stitching, dying and others, to boost exports to
the US and Europe. Al-Karam has its own retailers and vendors in Pakistan, while international
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value-added customers are Chaps, Lauren Conrad, Ralph Lauren, Macy’s and BBB. The
company has recently added a competitive R&D department in the company which will focus on
an ambitious target of taking on R&D process from fibre to the final product.

Alkaram has installed its own in-house co-generation plant consisting of two 3.3 MW Solar-
Caterpillar gas turbines and a Waste Heat Recovery Boiler. Additional gas turbines and waste
heat-recovery systems have also been installed, resulting in a lower load on the national
electricity provider and highly efficient usage of energy. Moreover air-conditioners are being
converted into solar-powered AC units, which will result in energy conservation worth
approximately USD 1.2 million per year.

Al Karam is also investing heavily in their advertising campaigns by getting celebrity

endorsements from renowned Pakistani actresses, namely Mahira Khan for its ‘Believe in You
Campaign’.

Nishat Linen

The Company is engaged in the business of textile manufacturing and of spinning, combing,
weaving, bleaching, dyeing, printing, stitching, apparel, buying, selling and otherwise dealing in
yarn, linen, cloth, other goods and fabrics made from raw cotton, synthetic fiber and cloth. The
Company is also committed to generate, accumulate, distribute, supply and sell electricity. It is
fully compliant with the requirements of all regulatory authorities of Pakistan. Overall, the
Company has 32 manufacturing units each specializing in a specific product range located in
Faisalabad, Sheikhupura, Ferozewatwan and Lahore. A major portion of the Company’s earnings
is export based. Over the years, the Company has achieved significant geographical
diversification in its export sales mix.

The Company has a very broad base of customers for its products outside Pakistan. It has a long
working relationship with the top brands of the world such as J.K.N. International, Levis, Next,
Pincroft Dyeing, Ocean Garments, Gap, Carreman, Tommy Hilfiger, Tommy Bahamas, Crate &
Barrel, Laura Ashley, American Living, Chaps, Hugo Boss, Revman and John Lewis. The
Company earns valuable foreign exchange by contributing around 3 percent in the textile export.

Sales of the Company decreased by Rs. 3,201 million (6.25%) in the current year as compared to
sales in corresponding last year. Despite of unfavorable volume and rate variances due to
stagnant global demand, sales amounting to Rs. 47,999 million were recorded, which is a
continuation of steady trend of sales over the last five years. Effective cost management was the
reason for more than proportionate decrease of 7.57% in cost of sales as compared to decrease of
6.25% in sales which resulted in increase in gross profit by Rs. 217.524 million (3.60%) in
current year as compared to gross profit of the corresponding last year. Financial Statement of
Nishat Mill is attached.
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An internal look:

Gul Ahmed analyzes its own value chain & processes

Procurement and Logistics

Procurement makes up 70% of the total operational cost at GulAhmed where 30% is attributed to
overheads such as electricity and wastages in the production process. Gul Ahmed works with
competent suppliers for raw materials to maintain its products’ standard and quality. The raw
material is purchased both from domestic and international markets. Strict quality controls are
placed on incoming orders and are audited for standard materials that become a part of the
operations. The suppliers are located in close proximity which reduces lead time and
transportation cost associated to manufacturing. The suppliers are connected to the company
with a well-established Enterprise Resource Planning (ERP) system to centralize operations
demands are launched on centralized system where warehouses are scanned for existing level of
inventory and purchases department launches request on the ERP system. The relevant
procurement officer quotes request to approved vendors and screens down vendor on quality and
price basis.

Operations

Operations and manufacturing at GulAhmed purse state of the art technology. In 2008, the
operations became ISO 9001 certified for Quality Management Systems. GulAhmed holds
Control Union Citification, Netherlands for Organic Content Standards (OCS) 100 and OCS
blended. The fabric, yarn, garment and home textiles are certified for Global Organic Textile
Standards (GOTS) version 4.0. GulAhmed Textile Mills was also granted authorization
according to Standard 100 by OKEO-TEX based on test reports.

Corporate Social Responsibility

GulAhmed Textile Mills has been assessed and certified as meeting the requirements of SA
8000:2014 for social responsibility. In its efforts towards sustaining the environment for the
generations to come, Gul Ahmed is committed towards adopting the best practices necessary to
ensure a greener society. Some key projects that are a part of move towards sustainability
include:

Liquid Effluent Project where Effluent Treatment Plants were installed in May 2017 where 1
million gallons per day of waste water within NEQS limits is treated and ongoing projects are
taken up to recycle waste water.

Gaseous Emissions Projects where cycle turbines where installed in 2006 that generate 10
megawatt of electricity. HRSG systems were installed in 2007 convert exhausted fuel gases. This
is the first combined cycle power plant in the textile industry.
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A memorandum of understanding was signed by The Pink Ribbon and Gul Ahmed with the
aim to raise awareness about breast cancer. Another MOU was signed with World Wide
Funds (WWF) for ensuring environmental sustainability.

Outbound Logistics

Gul Ahmed has adequate order processing system. It is playing a vital role not only as a textile
giant, but has its strong presence in the retail business as well. The opening of its flagship store –
Ideas by Gul Ahmed– marked the group's entry into the retail business. Starting from Karachi,
Gul Ahmed now has an extensive chain of more than 40 retail stores across the country, offering
a diverse range of products from home accessories to fashion clothing. GulAhmed has located its
warehouses at strategic locations where transport costs are reduced. The vast distribution channel
and total quality management ensured through centralized software gives an edge to GulAhmed.
The largest unit is established in Karachi alone which builds on to the cost of supplying to
markets elsewhere including Lahore, Multan and Islamabad.

Marketing

Gul Ahmed recently launched a 360-degree campaign ‘#MeinPerfectHoon’ to promote their

Spring/Summer 2017 collection embracing their physical ‘imperfections’ proudly while wearing
the brand’s latest lawn prints. GulAhmed’s marketing campaigns have been directed towards
overcoming the social and emotional barriers prevalent in the society. Gul Ahmed's performance
on the whole has been consistently improving off the back of the sector's improved
fundamentals, with the firm's gross profit margin having increased by nearly 33 percent in the
space of the last 12 months. The nonconventional marketing campaigns and participations taken
up by GulAhmed include:

 Heimtex Germany 2014

 Heimtex Gemanny 2013
 Home Fashion Week, USA
 Lifestyle Pakistan, India
 Yarn Expo, China
 GulAhmed Awards

Services

Gul Ahmed, we take pride in ensuring our customer's satisfaction, with efficient services. The
deeply value in customer’s relationship with Gul Ahmed and are committed to provide them with
the highest level of service and products, because our customers deserve the very best.

Customer Enrolment Program: With customer base registrations GulAhmed offer its valued
customer timely updates regarding campaigns, upcoming events etc.
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Efficient Complaint Management: GulAhmed always encourage its customers to lodge a

complaint against the product, if they found any defect in it. They see complaints as the
opportunity for improvement, and we ensure that complaints shall be addressed within provided
T.A.T.

Prompt Services: Customers are always welcome to call for any of their queries, requirements
etc., which we resolve immediate basis.

Customer Feedbacks: Customer feedbacks are very essential for continuous improvement of
every organization and we ensure the realization of positive and constructive feedbacks from our
customers into our general policies.

Manufacturing

For the process of spinning Gul Ahmed has more than 130,000 spindles as well as 4000 motors
imported from countries like USA, UK, Germany, Japan and others. There is a production
capacity of 120 tons per day of average yarn. Blow room lines use modern machinery and auto
cone machines to minimize contamination chances.

Spinning capacity has recently been upgraded with the addition of TRUCZSCHLER TC 11
carding machine, Reiter RSBD-22 drawing frame, and Murata 21C Q-PRO auto comers. For
fabric production Gul Ahmed has the most technologically advanced Air Jet weaving production
facilities? The production capacity is nearly 100,000 meters/day. There are 300 state-of-the-art
weaving machines.

The company possesses the most modern yarn dyeing, processing & stitching units. The yarn
dyed fabric capacity is nearly 350,000 meters/month based on 48 Air Jet looms. Gul Ahmed’s
stitching units have high-speed precision stitching machines that form products which meet
varying requirements across diverse markets. Some of the types of stitching machines include
cutting, button, embroidery and chain stitching matching among others.

For sustainability Liquid Effluent Treatment Plant (waste water treatment plant) was installed in
2007 which treated 1 million gallons per day of waste water within NEQS limits. There are
also on-going projects to recycle waste water. In order to reduce gaseous emissions cycle gas
turbine was installed in 2006 which generates 10 MW electricity. Exhaust flue gases fed to
HRSG to generate steam which was installed in 2007. The company had the first combined cycle
power plant in textile industry and thus educed heat content of flue gases going into the
atmosphere. There is an In-house power plant consisting of gas engines, gas & steam turbines,
and backup diesel engines.

Human Resource Management

On the basis of equal opportunity employment, Gul Ahmed hires solely on merit and believes in
accessibility to the workforce to be provided to all people hence, NGOs suggest people with
 16

disabilities for hiring. Women empowerment is a key step towards fulfilling the mission of equal
opportunity employment with over 1000 women employed in different positions

Gul Ahmed’s workforce is a shining example of multi culturist approach. The company
encouraged that through facilitations to foreign applicants for internships. In an effort to improve
the lives of its workers within the company and outside it, Gul Ahmed adheres to Safety, Health
& Environment (SHE) guidelines from the International Finance Corporation and so, conducts
various training drills and awareness programs including first aid, MSDS (Material Specification
Data Sheets of Chemicals) among others. The Company has maintained a suitable working
environment that provides appropriate training, transparent career growth opportunities and
competitive remuneration packages including benefits which are also in compliance with the
employment related laws and regulations of Pakistan as well as other relevant countries.

Technological Development

The company is run based on a centralized Oracle based ERP system which makes streamlining
processes that much easier. Research and Development is a major aspect of Gul Ahmed and is
done department wise and may include involvement of relevant departments as needed.

For coming up with the most eye-catching and culturally charged designs the latest CAD/CAM
systems and the most sophisticated laser and wax jet engraving technologies used. They
highlight Gul Ahmed’s dedication to computerization in all areas of design detail and
reproduction.

The company follows the 80/20 rule where major chunk of profits is invested in to research and
development. It follows the motto of living in the future where processes are shifting towards
mechanization and automation. Gul Ahmed has one of the best textile laboratories equipped with
state-of-the-art technology and staffed with highly qualified personnel. It has the capability to
cover a wide range of operations from the testing of raw materials to the evaluation of finished
products, according to customer specifications. As a part of quality control for online checking,
the processing laboratory is well prepared to control and support the processing unit at every
stage of production. For continuous improvement in the quality of the end product, research and
development is also carried out in the laboratory.

Procurement

With the help of centralized ERP system consumers’ demand request is generated and the in-
house store checks the inventory for confirmation of request. The store inventory is inadequate
then the request forwarded to the purchase department. The relevant procurement officer quotes
request to approved vendors and collects different quotation. After comparing different prices the
best quotation is selected orders are placed from the best vendor.
 17

Gul Ahmed’s key strengths: Core Competencies

Environmental Friendly Production Facility

GulAhmed Textile Mills has been assessed and certified as meeting the requirements of SA
8000:2014 for social responsibility. In its efforts towards sustaining the environment for the
generations to come, Gul Ahmed is committed towards adopting the best practices necessary to
ensure a greener society. Its collaborations with WWF have made processes environmental
friendly where energy conservation has become a key priority.

Research and Development

GulAhmed employs its resources on developing new products and focuses on improving its
internal systems as well. It consistently develops new soft wares and other process to reduce its
costs and also improve efficiency. It is one of the core competencies they possess. GulAhmed
values its research and development and focuses year on year. It strives to make itself better by
generation and execution of new ideas. R&D not only works on improving the product but it also
looks to improve its internal processes or the value chain.

Cost Management Systems

GulAhmed records its strategic costs through traditional accounting system. A different
department looks into the aspects of finances. The activities which lead to creation of costs are
identified and are also assigned to them. Strategic costs for GulAhmed include:
 Raw Material Costs.
 Operational Costs. (warehousing, manufacturing & workforce)
 Importing costs.
 Logistics costs.

Distribution Channel

Gul Ahmed has adequate order processing system. It is playing a vital role not only as a textile
giant, but has its strong presence in the retail business as well. The opening of its flagship store –
Ideas by Gul Ahmed– marked the group's entry into the retail business. Starting from Karachi,
Gul Ahmed now has an extensive chain of more than 40 retail stores across the country, offering
a diverse range of products from home accessories to fashion clothing. GulAhmed has located its
warehouses at strategic locations where transport costs are reduced. The vast distribution channel
and total quality management ensured through centralized software gives an edge to GulAhmed.
The largest unit is established in Karachi alone which builds on to the cost of supplying to
markets elsewhere including Lahore, Multan and Islamabad.
 18

Life is not a bed of roses: Problems faced by Gul Ahmed

Gul Ahmed being one of the best known firm of the textile industry is hitting charts but as every
firm has ups and downs Gul Ahmed has some issues too. At the initial stage to set up the firm
was a major task, already existing big names were difficult to compete. Their market share was
on top and people preferred to continue with existing brands rather than new one as trust was
already made up. Today ideas Gul Ahmed is the biggest exporter of bed sheets and to build this
status it took a lot of hard work to come to this position. Pakistan is in process of developing and
textile industry is the major target. It is using all kinds of energy resources for the production.
Inefficient use of resources is leading the resources towards extinction creating problems for the
industry. The production decreased results in decrease in export affecting the GDP of the country
indirectly low development is the final result. The power supply totally detached in Punjab and
other places of the industrial areas of Pakistan. Due to that the production process has been
stopped on a large scale industrial unit that outside the industrial estates in particular province.
Today the circumstances became worst and it became difficult to continue the production
process for textile industries of Pakistan. There is also gas shortening to the textile industry and
government of Pakistan should take corrective and preventive actions to solve the energy crisis
faced by the textile industry of Pakistan.

Pakistan has suffered a lot both domestically and internationally due to law and order situation.
Anti-dumping duties and EU tariffs drove down demand for Gul Ahmed home textile products
abroad. Also, the conditional GSP (Generalized System of Preferences) status levies too many
prerequisites, meeting which is challenging. The foreign exchange risks, electricity shortfall,
high electricity tariffs and strong direct competitors like Al Karam, Nishat and Lucky Textile
being the major competitors pose greater challenges for the company.

Pakistan lost faith from the other countries due to violent environment and delay of orders due to
ongoing strikes in the country. Political instability has also shaken investor confidence in the
home textile sector which is both capital and labor intensive. Many industrialists closed their
units and moved to neighborhood countries to save there selves from ransoms and many other
such kind of issues.

Textile and its imports have been falling gradually over the past few years. There was slight
growth in the overall textile sector but major subsectors such as cotton yarn declined by 11%,
cotton cloth by 22%, knitwear by 38% bed wear by 40% and towels by 20%. Overall the sector
faced a decline of 30-35% in its export. The pie shows Pakistan’s textile exports split and the
heavy share of the first three products. There are several reasons behind this falling demand.
Although Pakistan enjoyed the monopoly in the textile sector for quite some time in the region,
the competition caught up fast and with better strategies. Competitors such as China, India and
Bangladesh have all invested in R&D unlike the Pakistani family run textile businesses. Also
 19

they know the importance of branding, recently the leaders of Bangladesh textile industry
persuaded global giants to higher prices such as Wal-Mart and JC Penny and they agreed. The
demand for value added items which fetch the maximum amount to the export basket has been
declining as the producers are unable to keep up with the changing global trends. Competitors
have also been focusing on skill development of its employees and better working conditions.

Increasing yarn and raw material prices is also a gigantic challenge for the textile industry of
Pakistan. The main cause of increasing raw material prices is that the grower of cotton or farmers
of raw material, like cotton are unable to get of their material and middle man enjoys benefits.
Along with this Production cost of textile industry has increased due to rising interest rates and
rising inflation as well as declining value of Pakistani currency. It has become a gigantic
challenge for the textile industry of Pakistan including the bigger names to compete and survive
in the international markets as other countries are taking benefit of issues faced by Pakistan and
enjoying the position. There is a lot of competition in the global market and to meet the criteria
big companies like Gul Ahmed should conduct R&D with the help of any R&D institution to
improve the quality of Pakistani cotton by arguing or by providing ideas to the cultivators of
cotton to improve the fiber quality.
 20

Time to make a strategic choice

Looking at the current situation, Gul Ahmed has certain strong opportunities and threats that
need to be considered. The opportunities that can be cashed upon include diversifying into the
cosmetics segment. A brand name is already established & a large consumer base is available, so
why should Gul Ahmed keep all their eggs in one basket? Hence, moving to the cosmetics
industry is a good opportunity for them. They can also target further market segments such as
lower priced or premium priced products, with a wider portfolio of items, more designs and
different quality options catering to each separate market segment. The abolition of quota on
Textile sector also provides easy access to international markets. Hence Gul Ahmed can enter
new markets and sell to a lot of countries in order to increase their customer base. On the other
hand, a threat in international markets is the lower cost clothing sold by international competitors
like China, India, Bangladesh and Thailand. Internally also, fierce competition is present in the
Pakistani textile industry as local firms such as Khaadi, Junaid Jamshed, Sana Safinaz, Saphire,
Cross Stitch etc are all fighting for market share.

Now, Gul Ahmed has a range of strategies available to choose from. Some possible strategies
include targeting further market segments (lower cost mass market/ upper class, niche market
with supreme quality, high priced products- in competition to Khaadi Khaas, Elan, Sania
Maskatiya, Sana Safinaz), increasing their share of exports, export more to existing countries and
start exporting to countries not currently catered to, introducing a range of cosmetic & personal
care products. They could also use the brand name & image to market and sell the diversified
products and create a competitive edge on the basis of cloth quality, color schemes, innovative
processes, high tech machinery, novel prints, trendy cuts, qualified designers, better employee
pool, better after sales service/ quick query & complaint resolution etc. Further strategies can
include creating and marketing a single big idea and revolving all future campaigns around that
idea. Moreover, they can differentiate their product from competing firms by building a stronger
positioning. Reducing product cost, without compromising on quality, focusing on increasing
efficiency, bulk buying of materials, mass production, zero waste techniques such as Just in time
& Kaizen, reducing waste, hire experienced supply chain managers to help manage costs, switch
to lower cost suppliers can all be other strategy options to choose from.
 21

TOWS Matrix:

STRENGTHS WEAKNESS

1. Deliver value through 1. Targeting elite class.

innovative technology and 2. High prices.
teamwork. 3. Energy crises.
2. Efficient product capacity. 4. Foreign exchange risk.
3. Unique designs and 5. Strong direct competitors.
creativity. 6. Marketing not vigorously.
4. Have their own power
generation plant.
5. Export their products
globally.
6. Adopts the best practices to
ensure a greener society.

OPPORTUNITIES S-W W-O

1. Expand in local and  Continue focusing on  GulAhmed can enter into

foreign markets by efficient product capacity to other segments such as
reducing their cost. expand in the international cosmetic and this way
2. New styles and trade markets such as Malaysia, they can cater all classes.
demands. Thailand. (S2, W1) (S1, W3)
3. Tap new market
segments.  GulAhmed can increase their  Product prices could be
4. Lower cost export base by introducing lowered by investing on
competitiveness. new styles and catering trade R&D as this way company
5. Increase research and demands. (S5, W3) can target several classes.
development. (S2, W5)
6. Abolition of quota.

THREATS S-T W-T

1. Increase in utilities  By further increasing the  Stable governmental

expenses. spending on R&D/ adopting policies regarding the
2. Change in governmental latest technology GulAhmed textile sector can help
policies. can achieve a competitive minimize the foreign
3. Economic downtown. position in foreign market. exchange risk. (S4, T2)
4. Competitors such as (S1, T4)
China, Bangladesh have
all invested in R&D.
 22

Implementation is key: Implementation tips & our recommendations for Gul Ahmed

Among the generic strategies available, we think Gul Ahmed should choose Differentiation.
This can be justified as Gul Ahmed targets and sells its products to a wide range of customers,
and already practices differentiation by innovation & new prints and designs.

Strategies are nothing without proper implementation & Gul Ahmed needs to ensure all
strategies chosen are implemented efficiently. For proper implementation, the company needs to
manage its resources, structure and culture according to the requirement of each strategy
planned to be implemented. Along with time management, and managing equipment, new staff
are to be hired according to the needs of the new strategy. All departments must be aligned and
coordinated with each other to bring out the best results. Furthermore, a conducive environment
should be built and a supportive organization culture should be present in Gul Ahmed if
excellent implementation is to be done.

We would recommend Gul Ahmed to diversify their business from textiles to the cosmetics
market. A dynamic firm should not put all its eggs in one basket, but should invest in several
sectors, in order to minimize risk of failure or loss. A further strategy we would like to
recommend is of global expansion & to increase their share of exports. Gul Ahmed should export
more to existing countries and start exporting to countries not currently catered to.
 23

Appendix 1: Porter’s five forces model:

 24

Appendix 2: Industry structure for Gul Ahmed

Yes (M) No
THREAT OF NEW ENTRANTS (TE): (+) (–)

1. Do large firms have a cost or performance advantage in your segment of the

industry?

2. Are there any proprietary product differences in your industry?

3. Are there any established brand identities in your industry

4. Do your customers incur any significant costs in switching suppliers?

5. Is a lot of capital needed to enter your industry?

6. Is serviceable used equipment expensive?

7. Does the newcomer to your industry face difficulty in accessing distribution

channels?

8. Does experience help you to continuously lower costs?

9. Does the newcomer have any problems in obtaining the necessary skilled
people, materials or supplies?

10. Does your product or service have any proprietary features that give you lower
costs?

11. Are there any licenses, insurance / qualifications difficult to obtain?

12. Can the newcomer expect strong retaliation on entering the market?

OVERALL T.E 5 3 4
 25

LOW HIGH

Yes (M) No
BARGAINING POWER OF BUYERS (to what extent are your customers (+) (-)
locked into you?)

1. Are there a large number of buyers relative to the firm number of firms in the
business?

2. Do you have a large number of customers each with relatively small purchases

3. Does the customer face any significant costs in switching suppliers?

4. Does the buyer need a lot of information?

5. Is the buyer aware of the need for additional information?

6. Is there anything that prevents your customer from taking your function in-
house?

7. Your customers are not highly sensitive to price

8. Your product is unique to some degree or has accepted branding

9. Your customers’ businesses are profitable

10. You provide incentives to the decision makers

OVERALL BPB 7 1 2

LOW HIGH
 26

Yes (M) No
THREAT OF SUBSTITUTES (Some other product or service that performs (+) (–)
the same job as yours)

Substitutes have performance limitations that do not completely offset their lowest
price. Or, their performance is not justified by their higher price.

The customer will incur costs in switching to a substitute.

Your customer has no real substitute.

Your customer is not likely to substitute.

OVERALL TS 3 0 1

LOW HIGH
 27

Yes (M) No
BARGAINING POWER OF SUPPLIERS (BPS) (+) (-)

1. My inputs (materials, labor, supplies, services, etc.) are standard rather than
unique or differentiated.

2. I can switch between suppliers quickly and cheaply.

3. My suppliers would find it difficult to enter my business or my customers would

find it difficult to perform my function in-house.

4. I can substitute inputs readily.

5. I have many potential suppliers.

6. My business is important to my suppliers.

7. My cost of purchases has no significant influence on my overall costs.

OVERALL BPS 5 1 1

LOW HIGH
 28

Yes (M) No
RIVALRY AMONG EXISTING COMPETITORS (+) (-)

1 The industry is growing rapidly.

2 The industry is not cyclical with intermittent overcapacity.

3 The fixed costs of the business are a relatively low portion of total costs.

4 There are significant product differences and brand identities between the
competitors.

5 The competitors are diversified rather than specialized.

6 It would not be hard to get out of this business because there are no specialized
skills and facilities or long-term contract commitments, etc.

7 My customers would incur significant costs in switching to a competitor.

8 My product is complex and requires a detailed understanding on the part of my

customer.

9 My competitors are all of approximately the same size as I am.

OVERALL RIVALRY 6 1 2

LOW HIGH
 29

OVERALL INDUSTRY RATING

(Yes) (M) (No) Level

1 Threat of new entrants. 5 3 4 Moderate

2 Bargaining power of 7 1 2 Low

buyers.
3 Threat of substitutes. 3 0 1 Low

4 Bargaining power of 5 1 1 Low

supplier
5 Intensity of rivalry among 6 1 2 High
competitors.
TOTAL SCORE 26 6 10 Attractive
 30

Appendix 3: Generic strategies: Cost leadership versus Differentiation

 31

Appendix 4: Gul Ahmed’s value chain

 32

Appendix 5:

IFE MATRIX

The overall IFE score reveals that Gul Ahmed is performing slightly below average in terms of
overcoming their weakness. For instance, higher prices and strong competition have got higher weights
as weakness. This has a huge impact on Gul Ahmed’s business.
 33

Appendix 6: QSPM
 34

Decision Model: Time to sustain the business!

For Gul Ahmed to finally pursue effective strategy plan, we design out two important strategy choices
for the company. First is unrelated diversification i.e. introducing cosmetic products. Since the company
already enjoys a huge market share in Pakistan and not only that, Gul Ahmed have good brand
recognition also. So, it is to perceive that moving to cosmetic industry is a good opportunity for them.
This may contribute to business growth and add a competitive pressure in the market.

The other strategy we put in decision model is global expansion. This means to increase exports to
existing markets and moving to new markets that are untapped. Gul Ahmed can effectively expand their
customer base by increasing exports.

The total attractive scores for both the strategies are quite impressive; this reflects that in the long run
Gul Ahmed can implement both the strategies to achieve the sustainability and competitive advantage
in the textile industry.